What does a "global" Canadian get after 25 years of seeing the best and the worst in technology companies, and working in several of the hotbeds where they came from?
At least for me, a profoundly sinking feeling that Canadian entrepreneurs are in big trouble on the world stage. We continue to fall behind countries large and small, from China and India down to Sweden and Israel. And the gap is increasing. Their companies become global market leaders and have positive exits, like going public or being bought. Our companies? Not so hot?.? I have witnessed this after living and working in Tokyo, Silicon Valley and Seattle before settling back home 10 years ago in Toronto to run a business that accelerates promising Canadian companies.
Canadian technology firms are coming up short of our esteemed international competitors in three critical areas: research and development, sales and marketing, and scaled financing. Poor performance in these areas has slowed many promising Canadian companies, giving their competitors a chance to catch up and, too often, leapfrog them. The root cause of the problem is this: Canadian entrepreneurs tend to launch businesses with only the Canadian market in mind.
Don't make the same mistake. Follow this playbook to make your startup export-ready from Day One, and you'll improve your chances of success substantially.
Research & development
There are two good reasons to assume from the start that your product or service will go global. First, you'll reach the point of diminishing returns in Canada, and you'll be forced to find opportunity elsewhere. Second, you'll become an "accidental exporter" after receiving enquiries from foreign customers who stumble across your website or read about your product in a magazine.
These eventualities should be factored into your R&D effort. Always look two years ahead, considering the language, protocols and standards of the major markets (e.g., the U.S., Northern Europe, Brazil) in which your product would likely be sold.
When it comes to local laws and certification requirements, the old adage of "measure twice, cut once" applies. One of the clients of my company, Behr & Associates, recently underwent nearly a full year of hardware re-engineering to meet Europe's tight environmental standards. The firm lost a year's worth of European revenue as a result—something it could have easily avoided by investing in understanding these requirements before the initial engineering effort began.
Many businesspeople dismiss patents as more trouble than they're worth. This might be true in some circumstances, but companies that lack intellectual-property protection can be heavily discounted by potential acquirers, or overlooked in favour of more mature companies. If your gut feeling is there's a decent chance you'll sell to a foreign firm, pursue an aggressive U.S. and European patent strategy.
This process does not have to be expensive, at least at the outset. You can do initial patent "prior art" work yourself, and then engage a patent attorney or agent to do initial patent work. Expect the costs to be in the range of $5,000 per filing, after which you'll have a year or so to decide what to do from there. A word of advice though. Patents are a lot like weddings or bar mitzvahs. You have to know when to draw the line on how many people are invited. You could spend yourself broke by trying to patent your product in all territories and jurisdictions. Let your patent strategy focus in on major markets only, generally the U.S. and Europe. Canadian patents are nice, but U.S. companies far prefer U.S patents.
Sales & marketing
I've been involved in millions of dollars worth of advertising and marketing spending, on every possible medium and program, across more companies and countries than I can count. In my experience, public relations is hands-down the most cost-effective way to achieve visibility and drive sales activity in the U.S.
Here's my PR recommendation: issue one press release every two to three weeks consistently. What to announce? How about new customers, new products and new partners?
My favourite kind of announcement of all is new awards. Every industry has annual recognition awards, both in Canada and in the U.S. Find out when the awards are being considered (generally in the autumn) and file an application. Because relatively few companies enter such programs, the chances are good you will get a nod. Voila: a press release on how your firm has been recognized as an industry leader.
Plenty of professional PR help is out there, but cash-strapped startups can get by with writing their own press releases and posting them through low-cost online distribution services, such as PR Web. Do that for a few months, and you'll be amazed how many people get to know you at a cost of a couple thousand dollars.
As for sales, adopt the strategy that serves entrepreneurial hotbeds such as Singapore, Israel, Sweden and South Korea so well: target big foreign markets first, and your smaller domestic market second.
Canadian convention is to take the opposite tack—and it can suck the life out of your firm. A couple of years ago, a young, promising Canadian cleantech firm sought our counsel after spending $2 million in its first two years, with little to show for it. We immediately discovered the firm had spent most of its short life chasing a single discount-store franchisee in rural Ontario to be its "safe" launch customer. We introduced the company to a U.S. retailer with more than 4,800 stores in North America alone and—bang!—a sale was made. This firm has since leveraged the revenue and glowing reference into deals with other companies and governments, plus several million in Silicon Valley venture capital.
But the more fundamental sales and marketing lesson is this: foreign customers and partners are generally far more willing to give a promising Canadian company a chance than their risk-averse domestic counterparts. Time and again, I have seen Canadian companies get a warm welcome stateside, where there is a more entrepreneurial spirit and more respect is given to small business owners.
Financing
Attaining external funding in Canada appears to be futile, but I have some heartening news.
If you are taking a global approach, distribution or "strategic" partners in the U.S. and Europe can be considered for funding support. By carefully issuing distribution rights to your product in international territories, you might be able to get these partners to place an initial stocking order or prepay for your product. There's also a chance that a distributor will pay for its territorial rights; $100,000 to $1 million seems to be the current price range.
Another strategy is to approach a potential acquirer on Day One, seeking a strategic relationship and attendant investment. To get your foot in the door, use LinkedIn to identify past or present executives in senior technology, sales, marketing or general management roles within the target firm. Send them an unsolicited InMail, and you'll be surprised how many people will respond to your enquiry from the Great White North. As a rule of thumb, look for $1 million to $3 million in exchange for 30% to 50% of your company.
Does this playbook make sense? I think so. Does it increase the chance of success? I know so. I hope more Canadian technology companies will run with it.
Albert Behr is principal of Toronto-based Behr & Associates, which accelerates promising Canadian IT, cleantech and nanotech companies. He is also a co-founder of Cleantech North, Canada's leading consortium of cleantech professional firms. He invites your feedback at abehr@behrassociates.com.
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